Today is a big and exciting day for world changing company Three Wheels United: They have been declared a top finance instrument for climate change by the Climate Policy Initiative! Three Wheels United combats climate change and poverty through financing electric auto rickshaws in India. Founded by Enviu in 2014, we developed a unique technology-enhanced lending model enabling this world changing company to provide an affordable, comprehensive, and accessible loan for drivers to purchase a smart electric auto rickshaw in India. Each vehicle reduces vehicular CO2 emissions by 65 tonnes over the vehicle’s lifetime, while generating 70% more income for the driver.
Three Wheels United, chosen out of thousands
The Lab – an investor-led initiative that aims to drive billions of dollars for climate action by developing and supporting innovative finance instruments – today launched its 2018 class of nine new investment vehicles. Over 30 high-level Lab members from governments, private investors, philanthropies, and development finance institutions convened today at The Rockefeller Foundation in New York during Climate Week to endorse and formally launch the vehicles for implementation.
And one of these vehicles is Three Wheels United! Three Wheels United was selected from out of over 3,000 applicants, for its innovation that is enabling the shift to electric vehicles among Bangalore’s citizens “at the bottom of the pyramid”. These vehicles are critical in India’s urban transportation system, and desperately need to be green, smart, and organized. Three Wheels United worked out the model to do this and is decongesting and decarbonizing India’s hazardously polluted cities.
With this recognition from Climate Policy Initiative and potential funding, Three Wheels United intends to scale this solution across India, providing life changing asset financing and ownership to some of India’s poorest, and leading to the reduction of hundreds of thousands of tonnes of CO2.
How Three Wheels United is battling climate change and poverty in an innovative way
India has 6 million auto rickshaws plying its roads, operated by over 12 million individuals. Any visit to India and you will find yourself in the back of one of these three wheeled vehicles. They contribute to over 23 million tonnes of CO2 annually, and the drivers earn less than €7 a day.
These drivers usually have no banking history, hence their difficulty receiving financing for purchasing a vehicle. If they receive a loan from an alternate source, such as a micro finance institution (MFI) or a non-banking financial institution (NBFI), the loan will not cover the entire vehicle cost, forcing them to seek supplemental funds from a money lender. This leads to inevitable default and loss of vehicle, forcing most to rent a vehicle daily. With dire consequences for them and their families. They are stuck in a vicious circle.
It became clear that these drivers cannot make the shift to a less polluting vehicle. This is where Three Wheels United stepped in to find the solution to the drivers’ obstacles, in order to also solve the larger pollution problem. First, Three Wheels United was playing a role as an intermediary for banks to provide driver’s financing, but, there were many hurdles that prevented this solution from being scalable.
In 2016 Three Wheels United shifted its model and incorporated a non-banking financial institution and foundation in 2017. Using alternate credit rating mechanisms, and a financial technology system, Three Wheels United is able to provide a loan that covers the entire vehicle cost, without guarantor (that most driver’s lack), at an affordable rate.
Scaling to create bigger impact
To date Three Wheels United has financed more than 2000 vehicles, with a default rate of less than 1%, and is ready to grow these numbers drastically over the coming years. This means more positive impact on the environment, and on the lives of rickshaw drivers and their families!
Want to dive deeper? Read the previous article we wrote on Three Wheels United and the Lab.